To “re-ignite” her interest, Karin Lundqvist recently participated in SSE Executive Education’s Managing Professional Services program, which replenished her knowledge, extended her networks and gave essential new insights. Now that most product-driven companies are switching to delivering services associated with their products, the question is no longer if, but rather how, servitization will contribute to future energy and energy services markets.
Reviewing the sales process
Karin finds it beneficial to discuss issues such as how to package and price these new services. Should the price of the service be cost-based and, if so, should a different model be applied? Should the service be priced separately or together with a product? And how do you generate interest for services internally in an environment traditionally characterized by product sales?
- It’s a matter of reviewing skills and developing capacities we haven’t previously had, such as profiling salespeople. We need to reconsider the entire sales process, from how we package our products and market them, to determining how we invoice, says Karin.
According to a report from the Chalmers University of Technology*, services offered “can strengthen customer relationships and create a competitive advantage over players who may have lower product prices.” Services also have a higher profit margin than products and can generate continuous revenue rather than product sales, which only generate profit at the time of sale. This can also be a good way to differentiate your offering from your competitors’ and build customer loyalty – a view with which Karin agrees.
Increased cooperation needed
From the customer’s perspective, it is a matter of obtaining a holistic solution, simplifying everyday life and processes. Today, customers consider it normal for energy suppliers to add services that maintain their product (energy supply) and to even offer services extending beyond their primary product.
According to Karin Lundqvist, Öresundskraft is handling this by developing new capabilities internally, strengthening existing skills and designing suitable IT systems. The company is also seeking partnerships with other actors externally.
- And so much more. This is a transformation in all dimensions, internally and externally. We have a completely new strategy (since 2017) and the product portfolio has been reorganized. The value chain has been turned around, with the customer’s needs now coming first, which is absolutely right. But, since we have none of the answers in advance, there is more trial and error involved now than before.
Distinguishing yourself from competitors
Where the encounter with the customer previously occurred once there was a finished product to offer, today the journey begins with the customers and what their needs look like. Services offer a way in which to generate customer loyalty and to differentiate yourself from your competitors. A great deal of customer data can be collected that should, in turn, be interpreted, analyzed and structured.
- We are a regulated industry subject to political governance and are not the first to undergo this transformation. But we will now identify new revenue streams in the flora, generating new business and opportunities.
In a disruptive era of innovation like this, leadership within the company is absolutely crucial, according to Karin. The industry has not changed for a long time and so much has suddenly happened at once and at a rapid pace. Everyone is affected, although to varying degrees.
- Many find it exciting while others think it’s all going too fast. In the management team, we are working continuously with leadership and considering how we can maintain sustainable teams. Since we are tearing down old structures, which can cause concern and frustration among employees, leadership needs to be strong and responsive. Not having that could be fatal.
Major changes in the future
What do you think the future looks like?
- I hope our customers take notice of our ambitions and our combined offering. To date, we have had a high level of customer satisfaction, and we should be happy about that. The future will bring even greater changes, an even faster pace and tremendously high pressure for change.
Karin provides some examples of future scenarios:
- We must make brave decisions and dare to do things we have not done before.
- We are initiating partnerships with other service providers (which is necessary for us and many others).
- In certain cases, we may act as subcontractors to other companies. Where they lack something and need us.
- And networking is also important, both in terms of partnerships and deliveries.
And, although future developments are rushing ahead, Karin is enjoying her work and likes working in an industry that she personally describes as “an important piece of the social puzzle” and as key to the transition to a more sustainable world.
- I’ve been in the energy industry for almost 15 years and it’s never been as exciting as it is now. I find it really enjoyable; I would not be happy in a context where I was not able to push development.
"In the future we will be even closer to our customers"
Jonas Kellberg has been CEO of Nacka Energi for two years. He also sees that the pendulum has swung, that the customer’s needs are in focus today, and he takes the view that energy companies must understand the customer’s perspective and start from there.
- Customers have previously purchased standard products and we have had limited contact with them. Today, things are different. With new needs entering the system, such as vehicle charging and photovoltaic cells, more contacts between customers and the energy company are needed. In the future, the value of flexible customers will increase with production being more volatile. We are seeing increasing interest from both consumers and smaller companies in participating and contributing, he says.
In Stockholm, there is a shortage of network capacity, particularly in the backbone and regional networks. Everyone is impacted here, customers and suppliers alike, due to ever-increasing power needs. This is one of the reasons why Nacka energi currently finds itself amidst the technical challenges and is devoting considerable effort to analyzing how the energy company can reduce the capacity and power needed and what services can be purchased from customers.
- We must perform an economically rational analysis and ask ourselves how the original product can be re-conceived in terms of services. Two questions we ask ourselves are how we can achieve our targets consuming less energy and using the grid more intelligently in the future, says Jonas with apparent satisfaction.
- We also have quite a lot of infrastructure that we can use together with other companies, including street lighting and water and sewerage, where we can generate synergies and share costs. Here, new opportunities will open up as the IoT (internet of things) breaks through as a technology. It’s fun to consider how much we can do today – and in collaboration with others too!
What do you think the future holds?
- In ten years, things will look very different from today and, without going into details, Nacka Energy will be much closer to its customers.
About Managing Professional Services
Managing Professional Services (MAPS) is a specially-designed leadership training program for managers in knowledge-intensive service companies focused on advisory services and consulting.
The program builds on the specific business logic of the knowledge-intensive services sector, helping you more effectively address the challenges and opportunities encountered.
Would you like to know more?
For more information, contact Didrik Reuterswärd, phone: +46 72 453 62 71 or firstname.lastname@example.org, or use the form to download more information about the program.